GE splits itself into three different companies, stock price jumps

General Electric (GE) shares jumped more than 8% before the opening bell Tuesday after the company announced it will split itself into three different companies. In a news release announcing the change, GE said the companies “will be better positioned to deliver long-term growth and create value for customers, investors, and employees”.

The companies are:

• GE Aviation
• GE Healthcare (expected to launch in early 2023)
• A combination of GE Renewable energy, GE Power, and GE Digital (expected to launch in early 2024)

“By creating three industry-leading, global public companies, each can benefit from greater focus, tailored capital allocation, and strategic flexibility,” GE Chairman and CEO H. Lawrence Culp, Jr. said in the release. “Today is a defining moment for GE, and we are ready.”

The split still requires board approval. As for who is heading up each company, Culp will become non-executive chairman of the healthcare company. He will also lead the aviation business along with John Slattery, who will remain its CEO. Peter Arduini will serve as president and CEO of GE Healthcare effective January 1, 2022. Scott Strazik will become CEO of the renewable energy, power, and digital business.

In the news release, GE said it expects “to incur one-time separation, transition, and operational costs of approximately $2 billion and tax costs of less than $0.5 billion,” due to the split.

“The proposed spin-offs of Healthcare and the Renewable Energy and Power business are intended to be tax-free for GE and GE shareholders for U.S. federal income tax purposes,” the company said.

In addition to the jump in stock price following Tuesday’s announcement of the three new companies, GE also announced it expects to lower its debt by more than $75 billion by the end of the year.

“We remain focused on continuing to reduce debt, improve our operational performance, and strategically deploy capital to drive sustainable, profitable growth,” Culp said. “We have a responsibility to move with speed to shape the future of flight, deliver precision health, and lead the energy transition.”